Holding And Management (Solitaire) Ltd v Miller (LANDLORD AND TENANT – SERVICE CHARGES) (2019) UKUT 402 (LC)

An Upper Tribunal appeal decision where just about everything that could have been wrong about the first instance First Tier Tribunal decision was.

Mr Miller had a flat on a 125 year lease. Under the lease, the leaseholder was responsible for the glass in the windows, but not the frames. There was a pretty standard repairing obligation on the freeholder for the structure and exterior and costs recovery for this by service charge.

Holding and Management brought a claim in the County Court against Mr M for £2440.47, being said to be:

a. Service charges and administration fees £1,123.03

b. Interest at 8% per annum under the County Courts Act 1984 being £76.44 and accruing at 0.23p per day

c. Alternatively contractual interest

d. Legal costs of recovery, due under the lease, £1,056

e. Court fee £105 and solicitor’s costs £80.

Mr M’s defence to the £1,123.03 was:

that (a) “the service charge element of this claim is a charge for window replacement”. He argued that he should not have to pay it, because he had himself replaced the windows of his flat, having paid a £200 fee for the appellant’s licence to do so. Further (b) he said that the administration charge element “should never have been made and anyway are exorbitant”. He also made a counterclaim of £480 for damage to his health and the work and costs he had had to undertake.

The County Court made an order that “This claim be sent to the First-tier Tribunal (Property Chamber)”. The FTT subsequently made directions under section 27A of the Landlord and Tenant Act 1985. So far, so standard. There appears to be a dispute as to the payability or reasonableness of the service charge and the County Court has transferred the matter to the FTT for a determination on this.

At the FTT hearing, the FTT decided:

1. “In relation to the claim under the service charge account in respect of replacement windows and front door at Cousins Court the Tribunal determines that a reasonable amount for the Respondent to pay is (i) £280 including VAT and (ii) in respect of surveyors’ fees and associated costs of that project the sum of £224.36 including VAT (totalling £504.36) (as particularised below.

2. No administration charges are recoverable (as particularised below).

3. Further or alternatively the claim for £1056 (or the balance thereof after deduction of any claimed administration fees) described in the county court claim form as “legal costs incurred to date in connection with the default” is refused on the grounds that it is irrecoverable (particularised below).

4. The claim for interest on unpaid arrears is refused whether under s69 County Courts Act 1984 or pursuant to the lease.

5. If required, and for the avoidance of doubt, an order is made under s20C LTA 1985 in favour of the Respondent on the grounds that it is just and equitable to make such an order.

6. The Respondent’s counterclaim is struck out/dismissed.”

Your eyebrows may be raised already. Mine were. They may be further elevated yet. Somewhat unsurprisingly, H & M appealed to the Upper Tribunal. The appeal was determined on written submissions by counsel Brooke Lyne for H & M and Mr M in person.

There were two main issues on appeal.

The first was that the FTT had no jurisdiction to make a decision on legal costs (3 above), the claim for interest (4 above) or dismiss the counterclaim (6 above), under s.27A Landlord and Tenant Act 1985.

The UT dealt with this briefly. The FTT in its reasons had said

“we have decided that the District Judge intended to pass the whole of the claim to the Tribunal, otherwise he (sic, actually she) would have made that clear (eg if limited to a s27A unreasonable charges claim). We therefore intend to deal with the whole of the claim, having already disposed of the counterclaim.)

The FTT’s jurisdiction is limited by s.27A LTA 1985 “to determine the reasonableness and payability of service charges”.

Section 176A of the 2002 Act only enables the county court to transfer to the FTT a question that the FTT has jurisdiction to answer. The FTT has no inherent jurisdiction and cannot decide matters that remain within the sole jurisdiction of the county court.

On the dual jurisdiction and ‘flexible deployment’ issue:

All judges of the FTT are by statute judges of the county court (paragraph 4 of Schedule 9 to the Crime and Courts Act 2013), and so can be deployed to sit as county court judges at the hearing in which they determine the questions transferred to the FTT. No such deployment arrangement had been made in this case, and the FTT judge is not free to decide to sit as a county court judge unless he or she has been specifically deployed to do so. It does not appear that the FTT judge thought that she was sitting as a county court judge, nor that the member who sat with her had been deployed as an assessor in the county court, and the decision under appeal was not a decision of the county court.

So, 3, 4 and 6 of the FTT decisions were set aside as the FTT had no jurisdiction to make them.

The second issue on appeal was the findings on the service charge.

In the FTT the respondent made a statement of case on 1 May 2019. In it he explained that he had replaced his own windows in 2014, with the appellant’s consent. He went on to say that on 16 September 2017 he received a letter from the appellant’s managing agents saying that he was to contribute £1,569.77 to the replacement of the windows in the rest of Cousins Court (although his own windows having been replaced the appellant was not going to replace them again), and that this would be taken from the reserve fund to which he had contributed. In response the respondent wrote to the managing agents saying that he was not willing to pay and would be deducting half the sum of £1,569.77 from the next two service charge demands. He attached to his statement of case a copy of his letter of 16 November 2017 to the managing agent in which he explained that he had made a deduction from the half-yearly service charge representing half the sum of £1,569.77 and would be deducting the same from the next charge.

From H & M’s submissions, albeit that the items in the charge weren’t as well set out as might be desired, the service charge demand at issue was actually for routine items such as insurance, fire systems maintenance, contributions to reserves, electricity and so on, plus some small administration charges.

None of the sums on either side quite added up, but it was clear

that the respondent took exception to the use of the reserve fund, to which he had contributed, for the replacement of windows in the block and therefore deducted his share of the cost of the windows from the service charges demanded of him. (…)  Nowhere is there any suggestion of a challenge to the service charges themselves.

The FTT

noted the appellant’s argument that the respondent’s decision to replace his own windows does not affect this contractual liability to contribute to the block service charge, but did not discuss that point or say why it disagreed. Instead it went on to say that it was unreasonable of the appellant to charge the respondent (and others who had taken the same course) with the repair of the windows for the other flats in the block. He had paid for his own windows and should not have to subsidise the cost of replacing windows in the other flats, However the FTT accepted that the respondent had to contribute to the replacement of windows in the common parts; it made some calculations based on the number and sizes of the various windows and came up with the figures of £280 including VAT for the cost of the communal window and front door and £224.36 towards surveyors and administration fees in respect of those windows.

The UT found that the FTT thereby “made a determination about the fairness of the use of the reserve fund (which was not relevant to the reasonableness and payability of the service charge), and on the basis of that assessment approved a deduction from the service charge”.

It was not open to the FTT to make this determination, as this was not the issue before it. The decision at 1 was set aside. The decision about administration charges (at 2) was simply irrational and also set aside, as was the decision under s.20C as none of the FTT’s decisions had been upheld.

The matter was remitted to the FTT to make a proper decision as to the reasonableness and payability of the claimed £1,123.03 in service and administration charges.

Comment

This was a truly awful first instance FTT decision. The jurisdictional hubris is one thing, the vaulting over the actual issues to be decided to get to some idea about what would be fair (although nothing to do with contractual liability or indeed fairness to other leaseholders) is another.

The jurisdiction point is important though. We’ve seen before the FTT in a pilot project area getting things wrong on when the Tribunal Judge could sit as a County Court Judge and when not (in Avon Ground Rents Ltd v Child (2018) UKUT 204 (LC) ). Here we have an FTT apparently deciding that the – admittedly undetailed – transfer order from the County Court somehow gave them authority to decide the whole claim (and badly, although of course, County Court decisions can also be bad at times).